AT&T; to Cut Back Efforts in 7 States

AT&T; Corp. said Wednesday that it would stop trying to add residential customers in seven states after losing a fight over access to local telephone lines.

Business customers and existing residential users won’t be affected, said the nation’s largest long-distance company.

AT&T; said it would stop marketing standard local and long-distance calling in Ohio, Missouri, Washington, Tennessee, Louisiana, Arkansas and New Hampshire. New customers can still sign up.

The company also lowered its annual financial outlook, saying pricing pressures, unfavorable regulations and new products would hurt its results.

The company said it expected revenue of $29.5 billion to $30.5 billion in 2004. Previously, the company had estimated revenue for the year would be $31 billion to $32 billion.

AT&T; said revenue for its consumer business would see a rate of decline in the “high teens” compared with 2003.

It said operating profit would decline to $1 billion to $1.4 billion for the year, excluding restructuring charges. In 2003, AT&T; reported operating profit of $3.6 billion.

AT&T; is scaling down efforts in states where renting local lines is more expensive than the average and it has fewer customers.

The move is a reaction to the Bush administration’s refusal June 9 to support efforts to keep federal telephone competition rules in place, AT&T; said. Those rules required local phone companies to lease their lines and equipment at regulated rates to competitors.

“They’re preparing for a big fight, so this is a statement they’re making,” said Daniela Spassova, a fund manager at Principal Global Investors, in Des Moines, an AT&T; bond investor.

Mark Cooper of the Consumer Federation of America called AT&T;’s decision “the beginning of the end of local telephone competition.”

FCC Chairman Michael K. Powell called AT&T;’s decision “disappointing,” but said, “Competition from wired, wireless and voice over the Internet providers is accelerating.”

Shares rose 7 cents to $16.41 on the New York Stock Exchange. In after-hours trading, shares fell to $15.68.

Associated Press and Bloomberg News were used in compiling this report.